ABSTRACT
Even before 1931 the pressure in favour of cheap money was considerable, especially in Great Britain where trade since the post-war slump had been in a permanent state of semi-depression. British public opinion began to attach considerable importance to the level of interest rates, which consequently had to be kept much lower than appeared desirable from the point of view of the defence of sterling. It is open to argument whether sterling would have been less vulnerable if interest rates had been kept at a higher level. Possibly interest rates abroad would have been raised in sympathy; possibly high money rates in London would have further accentuated the influx of “bad money” which eventually proved to be the direct cause of the collapse of sterling. However it may be, it is certain that during 1929 the authorities showed some reluctance to raise the bank rate for fear of unduly antagonising public opinion. In fact, even during the crisis of the pound they were unwilling to follow the advice of orthodox quarters, which advocated the raising of the bank rate to a fantastic level in order to save the pound. Presumably, the authorities were aware that a high bank rate would not have saved the pound but would have resulted in unfavourable political consequences, in addition to adverse economic effects.
